We Can’t Insure Our Way Out of the Climate Crisis

6 September 2018

Developed countries have long been fans of the “do as we say, not as we do” approach to climate diplomacy; so it should come as no surprise that they”ve adopted this approach to loss and damage in advocating for climate insurance as the solution.

As much as surely can be clear after the first days of this week; some developed countries still think, “Loss and damage is not a thing”. Yet, they have fallen over themselves to push vulnerable countries to take up climate insurance to deal with this “non-thing”. In fact, in the face of much more effective and evidence based solutions, they have pushed climate insurance as almost the sole response.

A new report, Not a Silver Bullet from the Heinrich-Böll- Stiftung, foundation shows how misplaced this reliance on “insurance only” is. Not only is it doubling down on the injustice of climate change to expect vulnerable countries to pay insurance premiums to cover a risk they did not create, but also, insurance alone is just not up to the task at hand. In the best case, insurance pays out a very small portion of the costs of loss and damage. Typically only two percent, as in the case of Dominica, where the costs of Hurricane Maria fell overwhelmingly on ordinary Dominicans, and other examples outlined in the report.

Dominica paid a premium for insurance with the Caribbean Catastrophe Risk Insurance Facility (CCRIF) from which it received an insurance payout of US$20.3 million, compared with total loss and damage of US$1.37 billion. Another example is the Africa Risk Capacity (ARC), which paid out US$8.1 million to Malawi in the face of loss and damage from the extreme drought of 2015-16 of US$366 million (noting that ARC paid out nine months late after disputing a payment was necessary).

Even in the United States of America, the home of private insurance, the response to the increasing cost of disasters is being covered by the states. US Federal Government exposure grew more than four times the rate of private sector insurance from 2007 to 2013. The emphasis on insurance provided via a public-private-partnership has worked to increase the profits of the insurance sector, while proving an expensive and inadequate solution for Americans, in the context of lower resilience and increased vulnerability of the population to the growing impacts of climate change. A different outcome for developing countries would require a considerably more holistic approach.

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